There have been of late many widely published reports that several regions of China, including the Pearl River Delta area, are experiencing a shortage of migrant workers.

Such reports come as a surprise to many China watchers, both at home and abroad, as this has to be considered a very rare situation indeed, in a country where a perceived labour surplus exists.

This, therefore, needs and demands full attention.

Firstly, we should examine the causes.

Economic reforms in resource prices and market structure are having a great effect on labour numbers.

Agricultural earnings have seen substantial increases in the first half of this year, which is an important factor governing the current economic situation.

According to the National Statistics Bureau, the average income of rural workers in the first half of the year reached 1,345 yuan (US$162), a 16.1-percentage increase year-on-year. Deducted from the price factors, the actual income increase was 10.9 per cent, which was still 2.2 per cent higher than that of urban residents. What is noticeable is that in this 16.1 percentage, wage income of farmers-turned-workers increased by 13.9 per cent, while the income earned from selling agricultural products increased by 18.9 per cent, and household commercial income increased by 15.4 per cent. These numbers show that agricultural income and household commercial income contributed much to this rise. At the same time, the average tax fee is 11.5 yuan (US$1.39), which is 27.2 per cent lower year-on-year. Among this, agricultural tax is reduced by 11.3 per cent. Many migrant workers, after comparing these earnings, may choose to work in the fields at home instead of relocating to cities. An added incentive to stay put is an increase in farm produce activity during the latter half - such as harvesting and picking - of the year, which means more incomes from agricultural production. Rural residents will make a rational choice after comparing the economic figures.

The number crunching and statistics allow us all, farmers and economists, rural dwellers and urbanites, to compare the cost and earnings of a rural labourer faced with a decision to up sticks for the city and factories.

Though there are no official statistics available, we can still get the basic idea of migrant workers' working and living situations.

The wage level of migrant workers has hardly changed in the past decade. Researches show migrant workers work 10 or more hours every day without weekend rests. Their working and living conditions in cities are poor and their wages are often defaulted. The average annual income of migrant workers is 8,000 yuan (US$967). After deducting food, housing, telecommunications and other expenses, there is not much left. Some young male migrant workers have no savings, living from hand to mouth.

Meanwhile, according to this year's farm produce prices, daily payment for labour in the agricultural sector can reach 50 yuan (US$6) - no lower than that for workers in the cities. During the slack seasons, rural labourers can engage in family economic activities. Though the daily earnings will decrease, living and working conditions at home are better than that in the cities, research now shows.

Under the current situation, net income of agricultural production in some rural regions is higher than in urban areas.

Previously, extremely low profits of agricultural production was the reason why millions of rural labourers migrated to the booming cities in search of work.

But such a change cannot be simply judged as good or bad. It has double-edged impacts.

The current change in the agricultural product market does not mean a fundamental improvement in agricultural production earnings. The high product price this year is just a blip on the market curve and will not sustain itself in the long term.

When the farm produce prices - and agricultural earnings - do drop, rural labour may again flow to urban areas. But such fluctuations, if they become a frequent component in the economic circle, are not good for the steady development of the urban economy nor the substantial improvement of agricultural economy. This is a great worry.

However, the current shortage of migrant workers can urge the betterment of working conditions for labourers, as well as adjustments in capital-labour relations. It will also push the government to carry out some favourable labour policies. These are reasons to be cheerful.

In the long term, increases in rural residents' incomes will depend on earnings in non-agricultural sectors.

The majority of rural labourers will transfer to urban areas for non-agricultural jobs. The demand and supply of labour will be even in the long run.

And the well-being of rural workers will have to rely on a yet undecided scale economy - the average household arable land should reach 3.33 hectares to keep up with standards, for instance. This can be achieved by 2030 if the annual transfer speed remains at 4 per cent. By that time, the economic status of China's rural population will be markedly upgraded.

But in an effort to accomplish this, structural reform should and must play a vital role.

The current shortage of migrant workers reveals the serious structural problems plaguing China's economy.

About half of the urban migrant labour force flows unstably and forms huge bounds. Such circumstances add risks to the development of enterprises, affecting the establishment of fair labour-capital relations, and goes against the requirement of modern economic development.

Labourers are both producers and consumers. But Chinese migrant workers tend to make money in cities and then consume in the countryside, which breaks to an unknown extent the balance between demand and supply.

The current system has intensified urban-rural economic separation. Migrant workers, without legal labour contracts when working in cities, cannot have their interests properly protected. Meanwhile, these farmers-turned-workers do not want to give up their land-use and property rights in the countryside because the rural collective economic system does not allow any compensation. Therefore, migrant workers have to reside in rural areas but work in cities. This has seriously stunted the urbanization process as well as the development of agriculture.

What is more, such a system has caused high dependence on foreign trade to oil the economy. Limited actions in protecting labourers' interests have led to so-called "cost saving" measures in the manufacturing industry. Inexpensive made-in-China products are always castigated by overseas market protectionists because of this.

China is not too familiar with international market mechanisms and low income levels have weakened the domestic market. This helped form the coexistence of surplus capital and surplus labour which today has become a serious structural problem that haunts Chinese economy.

To tackle this worrying blight on the nation's future prospects, reforms should be carried out in the following ways.

First, the rural land property rights system should be revamped. Migrant workers should be able to trade their land-use rights as a capital resource and then gain part of an economic guarantee for their settlement in urban areas. Second, a relatively high labour cost level should be enforced in big cities by regulating living and working conditions. Such a move will push labour-intensive industries to transfer from big cities to smaller ones and then enable labourers to work near their homes. This reform can be conducted by regional governments according to local conditions.

Last but not least, labour-capital relations should be adjusted. The payment and working conditions of migrant workers should be improved equally. Such a reform will enable migrant workers to settle down in the cities and become stable urban residents.

It is time for action now.

The author is a senior researcher with the Institute of Rural Development under the Chinese Academy of Social Sciences.

(China Daily 09/09/2004 page6)